GAAP EPS of at least $15.53 and operating (non-GAAP) EPS of at least
$16.70.

IBM (NYSE: IBM) today announced fourth-quarter 2012 diluted earnings of
$5.13 per share, compared with diluted earnings of $4.62 per share in
the fourth quarter of 2011, an increase of 11 percent. Operating
(non-GAAP) diluted earnings were $5.39 per share, compared with
operating diluted earnings of $4.71 per share in the fourth quarter of
2011, an increase of 14 percent.

Fourth-quarter net income was $5.8 billion compared with $5.5 billion in
the fourth quarter of 2011, an increase of 6 percent. Operating
(non-GAAP) net income was $6.1 billion compared with $5.6 billion in the
fourth quarter of 2011, an increase of 10 percent.

Total revenues for the fourth quarter of 2012 of $29.3 billion decreased
1 percent (flat adjusting for currency) from the fourth quarter of 2011.
Without the impact of the divested Retail Store Solutions (RSS)
business, revenue increased 1 percent, adjusting for currency.

"We achieved record profit, earnings per share and free cash flow in
2012. Our performance in the fourth quarter and for the full year was
driven by our strategic growth initiatives -- growth markets, analytics,
cloud computing, Smarter Planet solutions -- which support our continued
shift to higher-value businesses,” said Ginni Rometty, IBM chairman,
president and chief executive officer.

”Looking ahead, we continue to invest to deliver innovations for the
enterprise in key areas such as big data, mobile solutions, social
business and security, while expanding into new markets and reaching new
clients. We are well on track toward our long-term roadmap for operating
EPS of at least $20 in 2015.”

Fourth-Quarter GAAP - Operating (non-GAAP) Reconciliation

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.26 per
share of net charges: $0.21 per share for the amortization of purchased
intangible assets and other acquisition-related charges, and $0.05 per
share for retirement-related items driven by changes to plan assets and
liabilities primarily related to market performance.

Full-Year 2013 Expectation

IBM said that it expects to deliver full-year 2013 GAAP earnings per
share of at least $15.53; and operating (non-GAAP) earnings per share of
at least $16.70. The 2013 operating (non-GAAP) earnings exclude $1.17
per share of charges for amortization of purchased intangible assets,
other acquisition-related charges, and retirement-related items driven
by changes to plan assets and liabilities primarily related to market
performance.

Revenues from the Software segment were $7.9 billion, an increase of 3
percent (up 4 percent, adjusting for currency) from the fourth quarter
of 2011. Software pre-tax income of $4.0 billion increased 8 percent
year over year.

Revenues from the Systems and Technology segment totaled $5.8 billion
for the quarter, down 1 percent from the fourth quarter of 2011.
Excluding Retail Store Solutions (RSS), revenues were up 4 percent.
Systems and Technology pre-tax income was $1.0 billion, an increase of
23 percent.

Total systems revenues, excluding RSS, increased 4 percent. Revenues
from System z mainframe server products increased 56 percent compared
with the year-ago period; revenue in the growth markets increased 68
percent. Total delivery of System z computing power, as measured in MIPS
(millions of instructions per second), increased 66 percent versus the
prior year and represented the largest MIPS shipment quarter in the
company’s history. New workload specialty engines, including Linux,
represented one-half of the MIPS shipped. Revenues from Power Systems
decreased 19 percent compared with the 2011 period. Revenues from System
x decreased 2 percent. Revenues from System Storage decreased 5 percent.
Revenues from Retail Store Solutions decreased $239 million year over
year as a result of the divestiture in the third quarter. Revenues from
Microelectronics OEM increased 4 percent.

Financing

Global Financing segment revenues were down 2 percent (down 1 percent,
adjusting for currency) in the fourth quarter to $535 million. Pre-tax
income for the segment increased 1 percent to $518 million.

Gross Profit

The company’s total gross profit margin was 51.8 percent in the 2012
fourth quarter compared with 49.9 percent in the 2011 fourth-quarter
period. Total operating (non-GAAP) gross profit margin was 52.3 percent
in the 2012 fourth quarter compared with 50.2 percent in the 2011
fourth-quarter period, with increases in Services, Software and Hardware.

Expense

Total expense and other income decreased 2 percent to $7.3 billion
compared with the prior-year period. S,G&A expense of $5.9 billion
decreased 3 percent year over year compared with prior-year expense.
R,D&E expense of $1.6 billion increased 2 percent compared with the
year-ago period. Intellectual property and custom development income
decreased to $227 million compared with $253 million a year ago. Other
(income) and expense was income of $47 million compared with prior-year
income of $44 million. Interest expense decreased to $109 million
compared with $113 million in the prior year.

Total operating (non-GAAP) expense and other income decreased 2 percent
to $7.2 billion compared with the prior-year period. Operating
(non-GAAP) S,G&A expense of $5.8 billion decreased 3 percent year over
year compared with prior-year expense. Operating (non-GAAP) R,D&E
expense of $1.6 billion increased 1 percent compared with the year-ago
period.

Net income for the year ended December 31, 2012 was $16.6 billion
compared with $15.9 billion in the prior year, an increase of 5 percent.
Operating (non-GAAP) net income was $17.6 billion compared with $16.3
billion in 2011, an increase of 8 percent.

Diluted earnings were $14.37 per share compared with $13.06 per diluted
share in 2011, an increase of 10 percent. Operating (non-GAAP) diluted
earnings were $15.25 per share, compared with operating diluted earnings
of $13.44 per share in 2011, an increase of 13 percent. This was the
company’s 10th consecutive year of double-digit EPS growth.

Operating (non-GAAP) diluted earnings for the year exclude $0.88 per
share of net charges: $0.55 per share for the amortization of purchased
intangible assets and other acquisition-related charges, and $0.33 per
share for retirement-related items driven by changes to plan assets and
liabilities primarily related to market performance.

The company’s total gross profit margin was 48.1 percent in 2012
compared with 46.9 percent in 2011. Overall gross profit margins
improved year over year for the 9th consecutive year. Total operating
(non-GAAP) gross profit margin was 48.7 percent in the 2012 period
compared with 47.2 percent in the 2011 period, with increases in
Services and Software.

The weighted-average number of diluted common shares outstanding in 2012
was 1.16 billion compared with 1.21 billion shares in 2011. As of
December 31, 2012, there were 1.12 billion basic common shares
outstanding.

IBM ended 2012 with $11.1 billion of cash on hand and generated free
cash flow of $18.2 billion excluding Global Financing receivables, up
approximately $1.6 billion year over year. The company returned $15.8
billion to shareholders through $3.8 billion in dividends and $12.0
billion of share repurchases. The company’s balance sheet remains strong
and is well positioned to support the business over the long term.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on the
company’s current assumptions regarding future business and financial
performance. These statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially,
including the following: a downturn in economic environment and
corporate IT spending budgets; the company’s failure to meet growth and
productivity objectives, a failure of the company’s innovation
initiatives; risks from investing in growth opportunities; failure of
the company’s intellectual property portfolio to prevent competitive
offerings and the failure of the company to obtain necessary licenses;
cybersecurity and data privacy considerations; fluctuations in financial
results and purchases, impact of local legal, economic, political and
health conditions; adverse effects from environmental matters, tax
matters and the company’s pension plans; ineffective internal controls;
the company’s use of accounting estimates; the company’s ability to
attract and retain key personnel and its reliance on critical skills;
impacts of relationships with critical suppliers and business with
government clients; currency fluctuations and customer financing risks;
impact of changes in market liquidity conditions and customer credit
risk on receivables; reliance on third party distribution channels; the
company’s ability to successfully manage acquisitions and alliances;
risk factors related to IBM securities; and other risks, uncertainties
and factors discussed in the company’s Form 10-Q, Form 10-K and in the
company’s other filings with the U.S. Securities and Exchange Commission
(SEC) or in materials incorporated therein by reference. Any
forward-looking statement in this release speaks only as of the date on
which it is made. The company assumes no obligation to update or revise
any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding
the company’s results as determined by generally accepted accounting
principles (GAAP), the company has also disclosed in this press release
the following non-GAAP information which management believes provides
useful information to investors:

The rationale for management’s use of non-GAAP measures is included as
part of the supplementary materials presented within the fourth-quarter
earnings materials. These materials are available on the IBM investor
relations Web site at www.ibm.com/investor
and are being included in Attachment II (“Non-GAAP Supplementary
Materials”) to the Form 8-K that includes this press release and is
being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin
at 4:30 p.m. EST, today. The Webcast may be viewed at www.ibm.com/investor/4q12.
Presentation charts will be available on the Web site shortly before the
Webcast.

Financial Results Below (certain amounts may not add due to
use of rounded numbers; percentages presented are calculated from the
underlying whole-dollar amounts).

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Dollars in millions except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

Percent

Percent

2012

2011

Change

2012

2011

Change

REVENUE

Global Technology Services

$

10,284

$

10,452

-1.6

%

$

40,236

$

40,879

-1.6

%

Gross profit margin

37.6

%

36.6

%

36.6

%

35.0

%

Global Business Services

4,720

4,877

-3.2

%

18,566

19,284

-3.7

%

Gross profit margin

29.9

%

29.3

%

30.0

%

28.8

%

Software

7,915

7,648

3.5

%

25,448

24,944

2.0

%

Gross profit margin

90.6

%

89.8

%

88.7

%

88.5

%

System and Technology

5,763

5,803

-0.7

%

17,667

18,985

-6.9

%

Gross profit margin

44.1

%

40.5

%

39.1

%

39.8

%

Global Financing

535

548

-2.3

%

2,013

2,102

-4.2

%

Gross profit margin

43.8

%

49.7

%

46.5

%

49.8

%

Other

87

159

-45.3

%

577

722

-20.1

%

Gross profit margin

-73.2

%

-11.0

%

-71.6

%

-54.5

%

TOTAL REVENUE

29,304

29,486

-0.6

%

104,507

106,916

-2.3

%

GROSS PROFIT

15,167

14,722

3.0

%

50,298

50,138

0.3

%

Gross profit margin

51.8

%

49.9

%

48.1

%

46.9

%

EXPENSE AND OTHER INCOME

S,G&A

5,921

6,076

-2.6

%

23,553

23,594

-0.2

%

Expense to revenue

20.2

%

20.6

%

22.5

%

22.1

%

R,D&E

1,580

1,555

1.6

%

6,302

6,258

0.7

%

Expense to revenue

5.4

%

5.3

%

6.0

%

5.9

%

Intellectual property

and custom development

income

(227

)

(253

)

-10.1

%

(1,074

)

(1,108

)

-3.0

%

Other (income)and expense

(47

)

(44

)

7.3

%

(843

)

(20

)

NM

Interest expense

109

113

-3.8

%

459

411

11.8

%

TOTAL EXPENSE AND

OTHER INCOME

7,336

7,448

-1.5

%

28,396

29,135

-2.5

%

Expense to revenue

25.0

%

25.3

%

27.2

%

27.3

%

INCOME BEFORE

INCOME TAXES

7,831

7,274

7.7

%

21,902

21,003

4.3

%

Pre-tax margin

26.7

%

24.7

%

21.0

%

19.6

%

Provision for income taxes

1,998

1,784

12.0

%

5,298

5,148

2.9

%

Effective tax rate

25.5

%

24.5

%

24.2

%

24.5

%

NET INCOME

$

5,833

$

5,490

6.3

%

$

16,604

$

15,855

4.7

%

Net income margin

19.9

%

18.6

%

15.9

%

14.8

%

EARNINGS PER SHARE

OF COMMON STOCK:

ASSUMING DILUTION

$

5.13

$

4.62

11.0

%

$

14.37

$

13.06

10.0

%

BASIC

$

5.19

$

4.68

10.9

%

$

14.53

$

13.25

9.7

%

WEIGHTED-AVERAGE NUMBER

OF COMMON SHARES OUT-

STANDING (M's):

ASSUMING DILUTION

1,136.4

1,188.7

1,155.4

1,213.8

BASIC

1,124.7

1,172.2

1,142.5

1,197.0

NM - - Not Meaningful

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At

At

(Dollars in Millions)

December 31,

December 31,

2012

2011

ASSETS:

Current Assets:

Cash and cash equivalents

$

10,412

$

11,922

Marketable securities

717

--

Notes and accounts receivable - trade

(net of allowances of $255 in 2012 and $256 in 2011)

10,667

11,179

Short-term financing receivables

(net of allowances of $288 in 2012 and $311 in 2011)

18,038

16,901

Other accounts receivable

(net of allowances of $17 in 2012 and $11 in 2011)

1,873

1,481

Inventories, at lower of average cost or market:

Finished goods

475

589

Work in process and raw materials

1,812

2,007

Total inventories

2,287

2,595

Deferred taxes

1,415

1,601

Prepaid expenses and other current assets

4,024

5,249

Total Current Assets

49,433

50,928

Property, plant and equipment

40,501

40,124

Less: Accumulated depreciation

26,505

26,241

Property, plant and equipment - net

13,996

13,883

Long-term financing receivables

(net of allowances of $66 in 2012 and $38 in 2011)

12,812

10,776

Prepaid pension assets

945

2,843

Deferred taxes

3,973

3,503

Goodwill

29,247

26,213

Intangible assets - net

3,787

3,392

Investments and sundry assets

5,021

4,895

Total Assets

$

119,213

$

116,433

LIABILITIES:

Current Liabilities:

Taxes

$

4,948

$

3,313

Short-term debt

9,181

8,463

Accounts payable

7,952

8,517

Compensation and benefits

4,745

5,099

Deferred income

11,952

12,197

Other accrued expenses and liabilities

4,847

4,535

Total Current Liabilities

43,625

42,123

Long-term debt

24,088

22,857

Retirement and nonpension postretirement

benefit obligations

20,418

18,374

Deferred income

4,491

3,847

Other liabilities

7,607

8,996

Total Liabilities

100,229

96,197

EQUITY:

IBM Stockholders' Equity:

Common stock

50,110

48,129

Retained earnings

117,641

104,857

Treasury stock -- at cost

(123,131

)

(110,963

)

Accumulated other comprehensive income/(loss)

(25,759

)

(21,885

)

Total IBM stockholders' equity

18,860

20,138

Noncontrolling interests

124

97

Total Equity

18,984

20,236

Total Liabilities and Equity

$

119,213

$

116,433

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

Three Months Ended

Twelve Months Ended

(Dollars in Millions)

December 31,

December 31,

2012

2011

2012

2011

Net Cash from Operating Activities per GAAP:

$

6,346

$

7,097

$

19,586

$

19,846

Less: the change in Global Financing (GF)

Receivables

(4,151

)

(2,927

)

(2,906

)

(817

)

Net Cash from Operating Activities

(Excluding GF Receivables)

10,497

10,024

22,492

20,663

Capital Expenditures, Net

(981

)

(1,059

)

(4,307

)

(4,059

)

Free Cash Flow

(Excluding GF Receivables)

9,515

8,965

18,185

16,604

Acquisitions

(1,455

)

(1,588

)

(3,722

)

(1,811

)

Divestitures

13

10

599

14

Dividends

(957

)

(880

)

(3,773

)

(3,473

)

Share Repurchase

(3,006

)

(3,581

)

(11,995

)

(15,046

)

Non-GF Debt

(1,571

)

599

713

1,692

Other (includes GF Receivables, and

GF Debt)

(3,664

)

(2,906

)

(802

)

2,291

Change in Cash, Cash Equivalents and

Short-term Marketable Securities

($1,125

)

$

619

($794

)

$

271

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

FOURTH-QUARTER 2012

(Dollars in Millions)

Pre-tax

Revenue

Income/

Pre-tax

External

Internal

Total

(Loss)

Margin

SEGMENTS

Global Technology Services

$

10,284

$

297

$

10,581

$

2,027

19.2

%

Y-T-Y change

-1.6

%

-0.6

%

-1.6

%

5.0

%

Global Business Services

4,720

181

4,901

841

17.2

%

Y-T-Y change

-3.2

%

-5.9

%

-3.3

%

0.1

%

Software

7,915

815

8,730

4,017

46.0

%

Y-T-Y change

3.5

%

-4.2

%

2.7

%

8.3

%

Systems and Technology

5,763

186

5,949

974

16.4

%

Y-T-Y change

-0.7

%

0.0

%

-0.7

%

23.2

%

Global Financing

535

568

1,103

518

46.9

%

Y-T-Y change

-2.3

%

-0.1

%

-1.2

%

0.7

%

TOTAL REPORTABLE SEGMENTS

$

29,217

$

2,048

$

31,265

$

8,377

26.8

%

Y-T-Y change

-0.4

%

-2.4

%

-0.5

%

7.6

%

Eliminations / Other

87

(2,048

)

(1,961

)

(546

)

TOTAL IBM CONSOLIDATED

$

29,304

$

0

$

29,304

$

7,831

26.7

%

Y-T-Y change

-0.6

%

-0.6

%

7.7

%

FOURTH-QUARTER 2011

(Dollars in Millions)

Pre-tax

Revenue

Income/

Pre-tax

External

Internal

Total

(Loss)

Margin

SEGMENTS

Global Technology Services

$

10,452

$

299

$

10,751

$

1,930

18.0

%

Global Business Services

4,877

193

5,069

841

16.6

%

Software

7,648

851

8,499

3,710

43.7

%

Systems and Technology

5,803

186

5,989

790

13.2

%

Global Financing

548

569

1,116

514

46.1

%

TOTAL REPORTABLE SEGMENTS

$

29,328

$

2,098

$

31,425

$

7,786

24.8

%

Eliminations / Other

159

(2,098

)

(1,939

)

(512

)

TOTAL IBM CONSOLIDATED

$

29,486

$

0

$

29,486

$

7,274

24.7

%

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

TWELVE-MONTHS 2012

(Dollars in Millions)

Pre-tax

Revenue

Income/

Pre-tax

External

Internal

Total

(Loss)

Margin

SEGMENTS

Global Technology Services

$

40,236

$

1,166

$

41,402

$

6,961

16.8

%

Y-T-Y change

-1.6

%

-6.2

%

-1.7

%

10.8

%

Global Business Services

18,566

719

19,286

2,983

15.5

%

Y-T-Y change

-3.7

%

-9.7

%

-4.0

%

-0.8

%

Software

25,448

3,274

28,722

10,810

37.6

%

Y-T-Y change

2.0

%

-0.1

%

1.8

%

8.4

%

Systems and Technology

17,667

676

18,343

1,227

6.7

%

Y-T-Y change

-6.9

%

-19.3

%

-7.5

%

-24.9

%

Global Financing

2,013

2,060

4,073

2,034

49.9

%

Y-T-Y change

-4.2

%

-1.6

%

-2.9

%

1.1

%

TOTAL REPORTABLE SEGMENTS

$

103,930

$

7,896

$

111,826

$

24,015

21.5

%

Y-T-Y change

-2.1

%

-4.3

%

-2.3

%

4.8

%

Eliminations / Other

577

(7,896

)

(7,319

)

(2,113

)

TOTAL IBM CONSOLIDATED

$

104,507

$

0

$

104,507

$

21,902

21.0

%

Y-T-Y change

-2.3

%

-2.3

%

4.3

%

TWELVE-MONTHS 2011

(Dollars in Millions)

Pre-tax

Revenue

Income/

Pre-tax

External

Internal

Total

(Loss)

Margin

SEGMENTS

Global Technology Services

$

40,879

$

1,242

$

42,121

$

6,284

14.9

%

Global Business Services

19,284

797

20,081

3,006

15.0

%

Software

24,944

3,276

28,219

9,970

35.3

%

Systems and Technology

18,985

838

19,823

1,633

8.2

%

Global Financing

2,102

2,092

4,195

2,011

47.9

%

TOTAL REPORTABLE SEGMENTS

$

106,194

$

8,246

$

114,440

$

22,904

20.0

%

Eliminations / Other

722

(8,246

)

(7,524

)

(1,901

)

TOTAL IBM CONSOLIDATED

$

106,916

$

0

$

106,916

$

21,003

19.6

%

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING RESULTS RECONCILIATION

(Dollars in millions except per share amounts)

FOURTH-QUARTER 2012

Acquisition-

Retirement-

Related

Related

Operating

GAAP

Adjustments*

Adjustments**

(Non-GAAP)

Gross Profit

$

15,167

$

100

$

60

$

15,327

Gross Profit Margin

51.8

%

0.3Pts

0.2Pts

52.3

%

S,G&A

5,921

(91

)

(29

)

5,801

R,D&E

1,580

0

6

1,586

Other (Income) & Expense

(47

)

(7

)

0

(54

)

Total Expense & Other (Income)

7,336

(98

)

(23

)

7,215

Pre-Tax Income

7,831

198

83

8,112

Pre-Tax Income Margin

26.7

%

0.7Pts

0.3Pts

27.7

%

Provision for Income Taxes***

1,998

(45

)

30

1,983

Effective Tax Rate

25.5

%

-1.2Pts

0.1Pts

24.4

%

Net Income

5,833

243

53

6,129

Net Income Margin

19.9

%

0.8Pts

0.2Pts

20.9

%

Diluted Earnings Per Share

$

5.13

$

0.21

$

0.05

$

5.39

FOURTH-QUARTER 2011

Acquisition-

Retirement-

Related

Related

Operating

GAAP

Adjustments*

Adjustments**

(Non-GAAP)

Gross Profit

$

14,722

$

81

($10

)

$

14,793

Gross Profit Margin

49.9

%

0.3Pts

-0.0Pts

50.2

%

S,G&A

6,076

(82

)

2

5,996

R,D&E

1,555

0

23

1,578

Other (Income) & Expense

(44

)

(2

)

0

(46

)

Total Expense & Other (Income)

7,448

(85

)

25

7,388

Pre-Tax Income

7,274

166

(35

)

7,405

Pre-Tax Income Margin

24.7

%

0.6Pts

-0.1Pts

25.1

%

Provision for Income Taxes***

1,784

47

(24

)

1,808

Effective Tax Rate

24.5

%

0.1Pts

-0.2Pts

24.4

%

Net Income

5,490

119

(12

)

5,597

Net Income Margin

18.6

%

0.4Pts

-0.0Pts

19.0

%

Diluted Earnings Per Share

$

4.62

$

0.10

($0.01

)

$

4.71

* Includes amortization of acquired intangible assets and other
acquisition-related charges.

*** Tax impact on operating (non-GAAP) pre-tax income is calculated
under the same accounting principles applied to the GAAP pre-tax
income which employs an annual effective tax rate method to the
results.

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING RESULTS RECONCILIATION

(Dollars in millions except per share amounts)

TWELVE-MONTHS 2012

Acquisition-

Retirement-

Related

Related

Operating

GAAP

Adjustments*

Adjustments**

(Non-GAAP)

Gross Profit

$

50,298

$

376

$

264

$

50,938

Gross Profit Margin

48.1

%

0.4Pts

0.3Pts

48.7

%

S,G&A

23,553

(349

)

(294

)

22,910

R,D&E

6,302

0

20

6,322

Other (Income) & Expense

(843

)

(13

)

0

(857

)

Total Expense & Other (Income)

28,396

(363

)

(274

)

27,760

Pre-Tax Income

21,902

739

538

23,179

Pre-Tax Income Margin

21.0

%

0.7Pts

0.5Pts

22.2

%

Provision for Income Taxes***

5,298

98

156

5,552

Effective Tax Rate

24.2

%

-0.4Pts

0.1Pts

24.0

%

Net Income

16,604

641

381

17,627

Net Income Margin

15.9

%

0.6Pts

0.4Pts

16.9

%

Diluted Earnings Per Share

$

14.37

$

0.55

$

0.33

$

15.25

TWELVE-MONTHS 2011

Acquisition-

Retirement-

Related

Related

Operating

GAAP

Adjustments*

Adjustments**

(Non-GAAP)

Gross Profit

$

50,138

$

341

$

2

$

50,481

Gross Profit Margin

46.9

%

0.3Pts

0.0Pts

47.2

%

S,G&A

23,594

(309

)

(13

)

23,272

R,D&E

6,258

0

88

6,345

Other (Income) & Expense

(20

)

(25

)

0

(45

)

Total Expense & Other (Income)

29,135

(334

)

74

28,875

Pre-Tax Income

21,003

675

(72

)

21,605

Pre-Tax Income Margin

19.6

%

0.6Pts

-0.1Pts

20.2

%

Provision for Income Taxes***

5,148

179

(40

)

5,287

Effective Tax Rate

24.5

%

0.1Pts

-0.1Pts

24.5

%

Net Income

15,855

495

(32

)

16,318

Net Income Margin

14.8

%

0.5Pts

-0.0Pts

15.3

%

Diluted Earnings Per Share

$

13.06

$

0.41

($0.03

)

$

13.44

* Includes amortization of acquired intangible assets and other
acquisition-related charges.** Includes retirement-related items
driven by changes to plan assets and liabilities primarily related to
market performance.*** Tax impact on operating (non-GAAP) pre-tax
income is calculated under the same accounting principles applied to the
GAAP pre-tax income which employs an annual effective tax rate method to
the results.

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